Jeff Judy

Jeff's Thoughts - September 17 , 2008

What I've Learned: "Best Practices"

During the summer, at major banking schools across the country, I talk with hundreds of bankers from institutions of all sizes. It is a great way to hear what's going on at the front lines of our industry, an opportunity to learn what's at the top of the list of concerns for bankers and their management.

This year, two related themes I encountered over and over again were "best practices" and "communicating with the generations." And even though these themes originate from good intentions, they are too often applied wholesale to the way we do business, as miracle pills that will cure a host of ills. Without a more thoughtful approach, these ideas are less likely to be the next penicillin, and more likely to be the latest snake oil.

At banking schools, and in the financial media, I constantly hear about the industry's best practices. The idea, as I understand it, is to find the most successful approaches to industry issues and apply them in your own institution. That certainly makes sense, as a starting point. But if banks fail to adapt practices to their own markets and cultures, if they assume that what's best for some successful bank somewhere else is best for everyone, they will just blindly copy the leaders to the point that everyone will look the same.

And in an industry awash in sameness I believe this is counterproductive. Where is the competitive advantage in being exactly like your rivals? While other industries are talking about niche marketing, fine tuning products and services to very specific segments of their markets, our over-enthusiastic embrace of "best practices" drives us toward a "one size fits all" model. Best practices should be implemented in ways that help us differentiate ourselves from the pack.

We operate in a business where the dumbest competitor makes the rules. But as my Dad used to say -- "Don't argue with a crazy person; the onlookers can't tell which one is crazy." He could have gone on to say, "What's sane for one person could be foolish, if not crazy, for another!" What is a best practice for one institution may be a very bad idea for another, based on each institution's unique market and organizational characteristics.

Let's face it: behind the best practices implementation of many a bank management team is hidden the hope that there is a magic bullet for every issue in our industry. The real market leaders, the institutions that will come out of the current financial turmoil ready to strengthen their positions while their competitors are still merely recovering, are the ones who are willing to think for themselves, to plan and implement what I like to call "Best Outcomes". They will:

Assess situations that call for better approaches or new procedures in the context of their own institutions, including their target markets, their competitive landscape, and their history and culture;

Identify a range of options to resolve each issue, including some 'industry best practices' if they are appropriate, remembering that there is almost always more than one good answer to any important question;

Implement and sustain action plans based on what is best for their institution. That means commitment to a good plan, rather than hopping from fad to fad.

Focus on your own needs and context to get the best outcome for you, rather than be a clone of the institution down the street. Blindly adopting the practices of a well-run, wisely managed competitor could be one of the dumbest things you ever do.